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Published: Sunday, 12/10/2006

Exchange offers cash to farmers who help rein in greenhouse gases

BY JANE SCHMUCKER
BLADE STAFF WRITER
Fulton County farmer Colenzo Short surveys some of the 96 acres of wetland he preserved on his property near Fayette. He is being paid to capture greenhouse gases in the soil. Fulton County farmer Colenzo Short surveys some of the 96 acres of wetland he preserved on his property near Fayette. He is being paid to capture greenhouse gases in the soil.
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Colenzo Short calls his environmental preservation efforts old school.

He took it upon himself - without government orders - to plant grass and preserve as a wetland a farm in northwest Fulton County several years ago.

And it's his old-school principles of free enterprise rather than government control that makes him so hopeful for an idea for saving the Earth that's quite new locally.

Mr. Short is one of about 30 northwest Ohio farmland owners who have signed on to plans this fall to trade what they do for the environment - namely capturing greenhouse gases in the soil - for cash through the Chicago Climate Exchange.

"It's a win-win situation. You're helping out in the environment and you're getting paid for it," said Mr. Short, who lives in Fayette.

The exchange, which has been trading for three years and has paid about $5 million to landowners, includes big names such as Ford Motor Co., American Electric Power, Dow Corning, and DuPont.

It was the first of its kind in the world, according to Richard Sandor, the exchange's

chairman and chief executive, and it is similar to about eight exchanges in Europe - including the European Climate Exchange, which is a sister enterprise to the Chicago exchange - that have had far more active trading.

That's because businesses and other organizations in countries that have signed on to the Kyoto Protocol are under mandate to reduce carbon dioxide emissions, and they can use trading on such exchanges to do so. The United States has not signed the treaty and does not have such regulations on carbon-dioxide emissions, although Mr. Sandor, a former chief economist with the Chicago Board of Trade, predicted such rules are coming.

Either way, he called the exchange "an enormous opportunity for American agriculture to partner with American industry."

"This, I think, for America's farmers represents a whole new opportunity," Mr. Sandor said. "We now have farmers having two crops. One above the ground called food. One below the ground called environmental service."

The Chicago exchange works like this:

About 225 industries, cities, universities, and other organizations have voluntarily joined, pledging to reduce emissions of carbon dioxide and other greenhouse gases that many scientists predict will cause global warming, melt ice fields, raise the water level of the oceans, and lead to more Hurricane Katrina-type disasters.

One of the ways they try to reduce such gases is by paying others - such as farmers and owners of grasslands and forests - to capture more of the carbon dioxide that the exchange members are producing in their factories and cities.

Growing plants take carbon dioxide out of the air and release oxygen back into the air, but they store the carbon.

That means the millions of acres of corn, soybeans, wheat, and other crops that Ohio and Michigan farmers raise each year are big reducers of the carbon dioxide created by driving automobiles and producing electricity - especially from coal-fired plants.

For maximum effectiveness in capturing carbon dioxide, however, farm fields cannot be tilled. Plowing and discing allows oxygen to mix with the carbon stored in the soil from the roots of previous crops and thus carbon dioxide again disperses into the atmosphere.

Most local farmers do some plowing or discing, which is why the members of the Chicago Climate Exchange are offering an incentive to those who agree not to till their fields when they plant. Convincing more farmers to do that, some say, will be cheaper than making big changes in factories and automotive engines to reduce carbon dioxide emissions.

"Really what it comes down to is getting the environmental benefit for the least economic cost for society," said Melissa McHenry, spokesman for Columbus-based American Electric Power, which provides electricity for communities in 11 states, including the Findlay and Lima areas.

The climate exchange makes its trades in what it calls carbon credits. One carbon credit is equal to 1 metric ton of carbon dioxide.

So, through the exchange, a business or municipality that is emitting carbon dioxide can buy an offset from landowners who are trapping that much carbon in the soil and thus essentially cancel out the carbon dioxide the industry or city is putting into the atmosphere.

Last week, 1 metric ton of carbon was trading at about $4 on the Chicago Climate Exchange. Here's how that amount translated into cash for farmers and other land owners:

•In exchange for a pledge to raise no-till crops for a year, the exchange was paying about $2 an acre.

•For land planted to alfalfa or other grasses, which are perennials, the exchange was paying about $3 an acre.

•For forests, it was paying $4 to $20 an acre, depending on the age, type, and location of the trees.

•Livestock farmers who capture the methane from their animals' manure, either by using it to produce electricity or just burning the gas off, also can trade those efforts on theexchange. For dairy farmers, the carbon credits offered on the ex-

change were equivalent to $20 to $30 per cow per year.

Those figures are about four times the lowest price in trading on the exchange. In its early days, the exchange paid as little as about 50 cents an acre for raising crops no-till for a year and 75 cents an acre for grasslands.

Even at today's rates, the exchange probably isn't paying enough to convince farmers to do something they wouldn't do otherwise, said Matt Roberts, an agricultural economist at Ohio State University.

"If we talked about $10 or $20 an acre, that could be a number that could change practices," he said.

Although he terms the exchange "a great idea," he said it's probably not making a big difference in agriculture today. Most of the landowners signing on are being paid a fairly small amount of money for doing what they would probably be doing without the exchange.

Promoters of the exchange to farmers and landowners agree to some extent, but they say that might change.

Today's members are setting the framework for what might grow into a much larger and more active exchange, said Dave Miller, director of research and commodity services with the Iowa Farm Bureau.

The Iowa Farm Bureau and the North Dakota Farmers Union are the two organizations that have been recruiting northwest Ohio farmers to participate this fall.

Most individual farmers don't have enough acres or cows to trade on the exchange themselves. So the Farm Bureau and Farmers Union are organizing landowners so that together they have a block of carbon credits that can be traded.

Both are drawing the bulk of their participants from the Western corn belt.

The Farm Bureau, which has paid more than $1 million to landowners for carbon trades over three years, has 900,000 acres signed up, most of which are in Nebraska, Iowa, and Kansas, Mr. Miller said. He has seven contracts in Ohio, including landowners in Hardin and Marion counties, and one contract in Michigan.

The Farmers Union is newer to the climate exchange, but it has more acres in its pool than the Farm Bureau.

The Farmers Union, which anticipates making its first sales next month, has amassed 1.1 million acres, according to Dale Enerson, director of the National Farmers Union Carbon Credit Program.

Of those acres, more than 800,000 are in North Dakota, where the Farmers Union effort is based. But a recruiting blitz in western Ohio in late October and early November drew 26,752 acres from 62 landowners, including some from local counties such as Ottawa, Fulton, Henry, Hancock, Defiance, Putnam, Allen, and Van Wert.

Many eastern Ohio counties are not yet approved by the exchange for trading, although that is expected to change next year. In Michigan, just under 2,000 acres have been signed up by the Farmers Union.

The goal, according to Ohio Farmers Union President Joe Logan is to "do well by farmers in Ohio" with an income supplement. But there's also a larger mission of being part of the solution to greenhouse gases that the Farmers Union sees as "a serious issue that needs to be dealt with sooner rather than later," he said.

Businesses and organizations have joined the exchange for a variety of reasons.

Some have joined in hopes that a strong show of support for a voluntary program will reduce desire for regulation in the United States.

Ford Motor Co., for instance, prefers voluntary, market-based approaches over government mandates, according to its environmental spokesman, Kristen Kinley.

It has not purchased carbon credits on the exchange because it has been able to meet its environmental goals with energy-efficiency improvements of its own. But the company is still a proponent.

"We do think that voluntary market-based approaches to reduce carbon dioxide can be effective and believe that the data developed through the Chicago Climate Exchange will help to shape and inform the public debate," a company statement says.

Others, such as the exchange's leadership, foresee a mandatory carbon dioxide reduction program in the United States.

American Electric Power is one of those. "This is really an opportunity for us to get ahead of the game," its spokesman, Ms. McHenry, said.

Contact Jane Schmucker at: jschmucker@theblade.com or 419-337-7780.



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